Forget about buying options in solar stocks based on polling data favorable to a Biden win or fracking stocks favorable to a Trump reelection. Look to China—even if you do not like what you see.
Now, I have been hard on China in past articles for two reasons: One, because, as the editor of a Chinese company-focused website, this attitude only further cements my reputation as objective; and two, the nation where this pathogen was born (and unsuccessfully covered up), is the same nation that will benefit most by its devastation—albeit in relative rather than in absolute terms. And while it is hard in the West not to wince at such a win for autocracy, China is where a significant portion of your investment dollars should be headed for the next few years. Because, according to some experts, we in the West won’t be back to the old normal until 2024.
Yes, not a typo: 2024.
At least that’s what Nicholas Christakis, the Sterling Professor of Social and Natural Science at Yale University, said on a recent episode of author Sam Harris’ podcast.
Best case scenario, it looks like there will be a safe, reliable vaccine approved sometime in 2021, but that is just the beginning of long, dark winter.
“I think sometime in 2021 we may discover a vaccine," Christakis says. “How safe it is or how effective it is, is hard to predict.”
Then comes the part of getting it to everyone, a logistical nightmare of underappreciated proportions. Maintaining the “cold chain” to keep the vaccine at consistently cold temperatures to avoid contamination might be easy when you are moving vials between New York City hospitals but significantly more challenging when you are trying to get the vaccine to villages in Sub-Saharan Africa.
More contagious than the flu, in a non-immune population interacting normally (sans lockdown) for every case of SARS-COV-2, between 2.5 and 3.5 new cases will arise; the seasonal flu’s intrinsic transmissibility is between 0.9 and 1.6. To achieve herd immunity, the virus must slowly run out of new people to infect.
“The more transmissible the disease, the higher percentage of people have to acquire immunity for herd immunity to kick in naturally, or the higher the fraction of people have to vaccinated,” explains Christakis.
The fact that there is currently widespread resistance to any Covid-19 vaccine makes a slow, insidious death march to natural herd immunity more likely.
Plus, no one thinks any vaccine is going to be a magic bullet for this particular pathogen. Seasonal flu vaccines are typically about 60% effective; the FDA has said it is hoping for a 50% effective rate for Covid-19 vaccines. Plus, if it does work, it may only protect you for a few months. We will likely be getting a seasonal Covid-19 shot for generations to come until Covid-19 mutates into a relatively mild virus fairly or fairly referred to as the “Chinese cold.”
In the meantime, we have made progress on treatments, such as the “old and cheap” drug dexamethasone shown to reduce mortality by 20%, and other promising treatments, says Christakis. Doctors have also learned simple, potentially lifesaving things about this virus such as putting patients on their stomach rather than their back.
“You’d much rather get Covid now than in March,” Christakis says.
Well, that's somewhat reassuring.
Mining Chinese Profits
While the West struggles, China’s market will keep growing disproportionately. As the American and European markets turn bearish, China will enter a secular bull market—unless their hundreds of millions retail traders don’t cause it to overheat yet again.
Chinese mining stocks are a great defensive long-term buy in this market. China consumes roughly half of the world’s industrial metals, according to analysts, so this is a space to play as the nation gets back on its feet.
China says it will go green and is investing an impressive number of billions to do so. While there are some coal plays, best to stick to gold and copper, two metals China consumes at insane rates.
I like Zijin Mining Group Ltd. (HKEX: 2899; OTC: ZIJMF), whose stock has more than tripled since the summer, with more room to run. Financials released in September show the company’s revenue and net income rose by 37% and 86%, respectively, year-over-year. For copper, a metal used in nearly everything an economy needs, look to Jiangxi Copper (SSE: 600362), the largest copper producer in mainland China. The stock only trades in Shanghai, so you’ll need an overseas broker.
Betting on China through American or European companies with tons of business in China is a solid bet. European luxury goods stocks were crushed early in the year on China’s struggle with Covid-19. I like London-based Burberry (OTCMKTS: BURBY). At around $17.50 per share, the stock is still trading at nearly half of what it was in January. Popular in China, Burberry has accumulated about 1.51 million followers on Weibo, a very popular Chinese social platform, and the number of followers on Tmall sales platform has now reached 2.16 million. BURBY is a Buy.
And then there is Apple (Nasdaq: AAPL). The stock is down now on less-than-expected iPhone sales in China, where 25% of its phones are sold. But December and January should see a big bump in sales. I like options expiring January 15 for Apple. Also, I like Starbucks (Nasdaq: SBUX) for its China focus.
Its trading curve is one long uptrend, less some impact from the U.S.-China trade wars. Among big Chinese stocks trading in New York, this is one that is sure to continue growing. This month, the stock in Alibaba Group (NYSE: BABA; HKEX: 9988) has exceeded $300 for the first time – that’s about 70% above its level at the same time a year ago. And it isn’t even November yet, when the e-commerce giant traditionally leads China’s biggest annual sales festival. Last year, Alibaba Singles’ Day sales hit $1 billion in 1 minute, and $16.3 billion in less than 90 minutes.
So, buy Alibaba while you still can at this recent dip back down to almost $300 per share. It has reached a new level this month – and next month it could reach another. One thing is for sure: BABA will be worth more than it is between now and this time next year, and even more by the next election of 2024.
Move Money and/or Yourself to Emerging Markets
Even a mask mandate and full implementation of the Biden “plan” won’t stop this pathogen. It’s too late; just ask Europeans. So, no matter what happens next week, the virus will continue to spread out of control, and we are years away from a return to the old normal. Stay-at-home and tech stocks will keep growing but will encounter hills and valleys. So, too, will Bitcoin.
So too will Amazon and so too will Alibaba and Zoom and Shopify and Apple and a host of other comparatively pandemic insulated companies. But Alibaba will not only yield more in the next six months but will see a steadier rise over the next few years. Other Asian nations, even the democratic ones, whose more disciplined populations have kept the coronavirus at bay, such as Japan and South Korea, will be markets worthy of investment. Emerging market ETFs in both countries as well as India are trades for the winter and beyond.
Make no mistake, America will be hurting for a couple of years at least. As Christakis says, “We’re going to be physically distancing; we’re going to have periodic school closures; we will be wearing masks; we are not going to be shaking hands; we will have a suppression in our economy until 2022.”
You can either move to China (if they ever let you in), or you can buy Alibaba and wait out the storm.
Whatever you decide, just wear a mask. Wear it not because Biden tells you to, but because you should. That mask is neither a virtue-signaling symbol of fulfilling civic duty, nor a symbol of oppression. That mask is just a means by which droplets containing a pathogen can be prevented from spreading to the next human host. Nothing more; nothing less. But it is too late to set a good example, Mr. Biden, the malarkey having already intractably manifested.
Wear it because the shell shock after this whole mess will linger until as late as early 2024, according to Christakis, after which a "kind of roaring 20s” will take root.
“There will be efflorescence. People will pack political protests and sports events and restaurants.” An exuberant era, he says, of “intemperance, sexual licentiousness, and joie de vivre.” At least, such has been the character of previous post-pandemic periods.
So hang tight, buy BABA while we ride this election and pandemic out. Don’t worry; we will be partying like it’s 2023 before you know it. I don’t know about you, but I look forward to New Year’s Eve 2023 in beautiful Taipei, capital of the sovereign and independent island nation of Taiwan.
Sorry, Chinese friends, I couldn’t resist….